Managing finances can be a daunting task, especially for business owners who have to juggle personal and business expenses.
However, separating your personal and business finances is crucial for the success and stability of your business. Not only does it help with organization and tax purposes, but it also protects your personal assets in case of any legal or financial issues.
In this article, we will discuss 8 easy ways to effectively separate your personal and business finances, ensuring financial stability and peace of mind for business people. By implementing these strategies, you can streamline your finances and focus on what really matters – growing your business.
Table of contents
1. Formalize and Register your business legally
2. Open a business checking account and get a business debit card
3. Get a business credit card
4. Pay yourself a salary
5. Separate your receipts and keep them
6. Track shared expenses
7. Record when you use personal items for business purposes
8. Educate your employees and partners,
Learn how to separate your personal finances and your business finances in order to better manage your cash.
Certain things don’t mix well — like your personal finances and your business’s. Keeping these things separate not only helps you reduce problems, it also greatly simplifies things and makes it easier to manage your finances.
Don’t know where to start with separating out your personal and business finances? Let’s look at some easy ways to do it.
1.
Formalize and register your business legally
If you haven’t already, establish a separate legal entity for your business, such as a Private Limited Company (PVT), Private Business Corporation (PBC)
Zimbard business Advisory services has tips on what structure may work for you, but it’s always best to get advice from a legal expert. Establishing a separate legal entity for your business has many advantages, including the ability to protect your personal assets from business debts, losses, and lawsuits.
2.
Open a business checking account and get a business debit card
If you’re serious about keeping your personal and business finances separate, opening a checking account strictly for your business is a no-brainer. If you’re strict about using it (along with your business debit card) for business needs and business needs alone, then getting a clear and complete picture of these expenditures when tax time rolls around becomes a simple matter of reviewing your bank statements.
Opening a business debit card or credit card allows you to stop using personal accounts for business transactions, and it’s an easy way to draw a clear line between personal and business expenses.
3.
Get a business credit card
A business credit card may also help you build stronger business credit scores, as long as you pay your bills on time. A strong business credit profile may boost your borrowing power and help you qualify for small business loans with lower interest rates. As a business owner, you are likely building business credit rather than personal credit.
4.
Pay yourself a salary
You’re your own boss; make it official and write yourself a check each month from your business checking account. Transfer this to your personal checking account, and then behave as you would if you were working for someone else. Regarding personal needs, treat your business checking account and your business credit card as you’d treat a former employer’s — hands off.
5.
Separate your receipts and keep them
What better way to demonstrate your commitment to keeping your personal and business expenses separate than by physically separating your respective receipts?
Think good old-fashioned folders, or separate folders in your email for digital receipts.
This simple practice helps you sleep easier knowing that if Zimra ever comes knocking, you’re prepared.
6.
Track shared expenses
One advantage of being a small business owner is that many business expenses are tax-deductible.
Taking a prospective partner to a nice lunch to talk things over?
Stocking up on coffee for your employees? Write it off.
At the same time, avoid the temptation to use the business card for personal needs.
You can ask a cashier to ring up purchases as separate transactions every time. Or you can use a business debit card, Not only will separating expenses make things easier for your accountant come tax time, but you also protect yourself by keeping a spotless financial record and continuing the keep-the-receipts-separate discipline that can save you so much headache down the road as your company grows.
7.
Record when you use personal items for business purposes
We all wish we could drive a company car and fly a company jet. But for most small business owners, the car that gets you to the gym in the morning is also what gets you to that big marketing convention in another town.
The same thing goes for your cellphone, and any item that you use regularly for both personal and business purposes. Any expenditure that you can legally write off should be written off to save you money come tax time. Zimbard Business Advisory Services can help you figure out what’s deductible, what’s not, and how to keep the right records.
8.
Educate your employees and partners
You know the difference between a personal and business expense; now make sure that the other people involved in your business do, too.
Get everybody on the same page, committed to the same goals. Staying disciplined is easier if others are doing it with you.
At first, it may not be easy to keep things neat and tidy. But even if you can work on a few of these tips this year, you’ll save both time and money during the next tax season, an audit, or even while looking for financing. Strong businesses grow by careful, incremental improvements, and learning to keep your personal and business finances separate is the perfect place to start.
Did you know that just by being around high performance individuals you can increase your own performance by 15%+
Let me know if this was of any value to you.
+263772218092
Everything is Possible
To your greatness,
Coach Doc Luke Moyana
Founder/CEO Business Wealth Network.
| Professional Business Coach | Personal Development Coach |Motivational Speaker | Mentor | Trainer | Facilitator |
| MBA Milan Italy |
| MBA Catholic University ZW |
Multi Award Winning Business Coach.
ICMF Business Coach of the Year 2021/2022/2023
luke@zimbard.co.ZW
+263772218092
moyanaluke45@gmail.com
